Fiat-Chrysler's state-backed loan crucial for Italy's economy-Intesa CEO says

Reuters

Published Jun 04, 2020 10:23AM ET

Updated Jun 04, 2020 11:20AM ET

MILAN (Reuters) - A 6.3 billion euro ($7 billion) state-backed loan for Fiat Chrysler (FCA) (MI:FCHA), financed by Intesa Sanpaolo (MI:ISP), is crucial in terms of safeguarding Italy's economy, the head of the country's biggest retail bank said.

The state-guaranteed loan has drawn criticism in Italy because FCA, which has moved its legal headquarters to the Netherlands, is working towards a merger with French carmaker PSA (PA:PEUP).

Italy is set to provide guarantees on 80% of the loan through credit export agency SACE under an emergency liquidity package adopted to help companies weather the coronavirus crisis.

Speaking on Corriere TV, Intesa CEO Carlo Messina said the loan was essential to protect a sector which accounts for 6% of Italy's national output because, under the terms of the loan, FCA will use the money to pay employees and suppliers, as well as finance investments in the country.

"With this transaction we're supporting a key sector of the economy, its suppliers and employment," Messina said.

"It's a key plank (of efforts) to safeguard (the economy in) the current phase, if we don't support sectors which are crucial for GDP such as automotive and construction ... instead of a 10% GDP contraction we'll have a 15% drop," he said.